Appraiser: (places guitar in case). There's a glut of guitars on the market now, and quite frankly, several similar guitars went unsold at recent auctions. I have dozens in my shop right now which I'm trying to sell overseas for $1,000 each.

Hopeful collector: How much could I get for it if I had to sell it right now?

Appraiser: The market is very difficult right now and I would place an auction value of $500 to $1,000 on the instrument--if we could find a buyer, of course.

Cheerful Appraiser: I see you've brought in a Colonial sideboard in wonderful condition. Let's take a look. (Pulls out drawer.) Wonderful--it's the original poplar wood, which was typical of furniture made in Philadelphia in the 1790s. (Strokes top of the sideboard.) And this is the original finish--what a the beautiful patina.

Hopeful collector: (Enthusiastically) We haven't refinished it or done anything but repair the rear foot.

Cheerful Appraiser: Terrific--you've done the right thing. May I ask what you paid for it?

Hopeful collector: (Less enthusiastically) Six years ago we bought it at auction for $10,000.

Cheerful Appraiser: Well, that was a very fair price at that time, but as you know, the furniture market has changed and there are many, many fine pieces available. So even though this is wonderful piece I would consider it very fortunate if this brought $1,000 at auction. There are very few collectors buying right now, as everyone's store and basement is already jammed.

Hopeful collector: (Murmuring) Would you give me $500 cash for it after the show?

Cheerful Appraiser: Gosh, I wish I had room for it but I can't move anything now except at rock-bottom prices.

The global credit bubble created an oversupply of cheap money sloshing around looking for a home, and some of that ocean of lucre sloshed into collectibles. Now, as global credit vanishes and assets are being liquidated or foreclosed to pay down debt, millions of basements, living rooms and storage closets will be emptied not just of junk but of collectibles the owner no longer has room for. What the owner needs is not a declining asset which takes up space but cold, hard cash.

As in all post-boom markets, everyone will be rushing to sell at the same time, depressing prices. As museums scramble to compensate for falling admission revenues and declining trust funds, they will have no choice but to quietly start thinning their collections--90% of which are in storage anyway.

As the once-wealthy find their assets falling, then collectibles will be the first to be jettisoned. As mansions get sold, foreclosed, auctioned or taken over by the State then the contents will be sold to the highest bidder--which won't be very high once the flood of stuff hitting the market becomes a tidal wave: Keeping Up Appearances: London Turns Eye to Empty Mansions (WSJ)

One line of thinking is that hyper-inflation might drive up the value of tangible goods such as collectibles. But hyper-inflation is by no means a guaranteed outcome, nor is the desire for collectibles. There are only three real measures of wealth: health, food and energy. Everything else is a means of exchange or a speculative store of temporary value.

Breaking news: Correspondent Richard Metzger's new site Dangerous Minds is now available for your browsing pleasure. Scroll down for his review of the new Harry Potter film and some amazing video/music clips. Enjoy!

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